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What is the purpose of the balance sheet in the final accounts?

Practice Questions

Q1

What is the purpose of the balance sheet in the final accounts?

To show cash inflows and outflows
To summarize income and expenses
To present the financial position at a specific date
To calculate net profit

Questions & Step-by-Step Solutions

What is the purpose of the balance sheet in the final accounts?

Step 1: Understand that a balance sheet is a financial statement.
Step 2: Know that it shows what a business owns (assets).
Step 3: Learn that it also shows what a business owes (liabilities).
Step 4: Recognize that the difference between assets and liabilities is called equity.
Step 5: Realize that the balance sheet is created at a specific date to show the financial position of the business at that time.

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